Strategy during the last stock market decline

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racy
Posts: 217
Joined: Sun Mar 30, 2008 7:38 am
Location: Nebraska

Re: Strategy during the last stock market decline

Post by racy » Wed Nov 14, 2018 7:29 am

I use rebalance bands of +/-20% for the 9 funds making up our IRA portfolio. I liked this research article by Gobind Daryanani CFP®, Ph.D.. He is a managing director at TD Ameritrade in Jersey City, New Jersey. He is responsible for re-balancing research.

http://resource.fpanet.org/resource/09B ... yanani.pdf

From his summary: "We have shown significant advantages of opportunistic rebalancing (look frequently and rebalance only when you need to) over traditional annual or quarterly rebalancing. Opportunistic rebalancing goes beyond simply controlling risk; it also increases return benefits by capturing sporadic buylow/sell-high opportunities."

jacksonm
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Joined: Tue Oct 16, 2018 11:48 am

Re: Strategy during the last stock market decline

Post by jacksonm » Wed Nov 14, 2018 11:42 am

F150HD wrote:
Wed Nov 14, 2018 6:48 am
jacksonm wrote:
Fri Nov 09, 2018 1:20 pm
I went with what was behind door #3. My IRA money was in a T. Rowe Price target date fund which took a big hit because they believed in a higher equity ratio than most other target date funds. I thought it would be a big mistake to make any changes at the time and that proved to be correct as it recovered very quickly.

It did cause me to re-think and change my strategy however. I now control my own asset allocations instead of depending on somebody else to do it.
Respectfully, sounds like you may have selected the wrong target date fund to put your $$ into. Should have selected one w/ a retirement date 5-10 years sooner (?) for a higher bond allocation.
Also respectfully, that sounds a bit odd to me. I thought the whole idea of a target date fund was to let them manage your money based on your target retirement date. If I have to choose a fund that has the kind of allocation I'm comfortable with then what is the point? I might as well manage the whole thing myself. Which is what I did, as I said.

dh
Posts: 295
Joined: Sun Mar 13, 2011 8:01 pm

Re: Strategy during the last stock market decline

Post by dh » Wed Nov 14, 2018 2:10 pm

CyclingDuo wrote:
Tue Nov 13, 2018 2:53 am


Our IPS states:

"Rebalance when allocations to broad asset classes are 5% points from targets."
"Max out retirement plans and Roth IRA's until retirement."

CyclingDuo: Thank you for sharing this and the charts you provided (I cut them out of this reply to save space). The chart showing the number of days bear markets have lasted was telling. While 900+ days seems like a long three year period, I believe most prepare for bear markets to last 5 or even 10 years. So keeping that in perspective during declines, coupled with your strategy to rebalance when 5% off targets, is a strategy I am going to adopt. Thank you!

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F150HD
Posts: 1722
Joined: Fri Sep 18, 2015 7:49 pm

Re: Strategy during the last stock market decline

Post by F150HD » Wed Nov 14, 2018 6:14 pm

jacksonm wrote:
Wed Nov 14, 2018 11:42 am
F150HD wrote:
Wed Nov 14, 2018 6:48 am
jacksonm wrote:
Fri Nov 09, 2018 1:20 pm
I went with what was behind door #3. My IRA money was in a T. Rowe Price target date fund which took a big hit because they believed in a higher equity ratio than most other target date funds. I thought it would be a big mistake to make any changes at the time and that proved to be correct as it recovered very quickly.

It did cause me to re-think and change my strategy however. I now control my own asset allocations instead of depending on somebody else to do it.
Respectfully, sounds like you may have selected the wrong target date fund to put your $$ into. Should have selected one w/ a retirement date 5-10 years sooner (?) for a higher bond allocation.
Also respectfully, that sounds a bit odd to me. I thought the whole idea of a target date fund was to let them manage your money based on your target retirement date. If I have to choose a fund that has the kind of allocation I'm comfortable with then what is the point? I might as well manage the whole thing myself. Which is what I did, as I said.
?

you said your money was in a TRP target date fund. who selected that fund to begin with?

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CyclingDuo
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Re: Strategy during the last stock market decline

Post by CyclingDuo » Thu Nov 15, 2018 9:28 am

AlphaLess wrote:
Wed Nov 14, 2018 1:06 am
That's a fantastic chart, thanks for sharing.

I would have to say that he 2008/2009 drawdown seems much easier to tolerate from today's point of view.
500 days is much shorter than the 900+ days from from the 2000-2002, which seems quite painful.

I lived through both of those, with not much in assets (well not compared to current day), and somehow, the 2008/2009 seemed much worse. Perhaps it was the feeling that money stored in banks, FDIC insured, could also have been lost
Don't forget the Black Swan event of the US being attacked on 9/11 in 2001 during the midst of that dot-com bust. That absolutely added to the extension, the fear and length of that particular bear market.

Corrections such as 2010, 2011, 2015-16 can always feel like the "end" is near and incite investor panic. Time will tell how the current correction turns out, but corrections and bear markets are all a part of the risk/reward scenario of investing for the longer term. Part of staying the course is simply accepting that part of the longer term journey as it will always include the ascensions and swoons that take months to years to play out in each cycle.

The "end" has been called for all along the most recent path, so it shouldn't be anything new to have the "end" being called for in 2018...

Image

The end will be called for many, many more times over the next few decades. We will go up, down, and all around in the process.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

JW-Retired
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Joined: Sun Dec 16, 2007 12:25 pm

Re: Strategy during the last stock market decline

Post by JW-Retired » Thu Nov 15, 2018 11:20 am

AlphaLess wrote:
Wed Nov 14, 2018 1:05 am
nisiprius wrote:
Fri Nov 09, 2018 4:39 pm
My wife and I were really scared. We did nothing at all. I wouldn't call it a "strategy."
When was this?
Were you employed or retired?
Why doing nothing is NOT a strategy? It is a VERY VALID strategy.
AlphaLess,

Nisi was talking about 2008/09, but I agree with you that doing nothing is a "very valid strategy". It worked fine for wife & me. We did some tax loss harvesting in 2008/9 but no rebalancing of existing portfolios, with the minor exception of directing all my new 401k contributions to 100% stocks. That trickle of new contribution money didn't have much effect on my large account. Luckily, it only took a couple of years for the tiny trickle and the big market rebound to rebalance us back near our 60/40 AA, with none of our bond money ever being touched. I was quite satisfied not taking the chance that the "great recession" would turn out to be years long and deep.

We will use exactly the same "strategy" again. :beer
JW
Retired at Last

wolf359
Posts: 1462
Joined: Sun Mar 15, 2015 8:47 am

Re: Strategy during the last stock market decline

Post by wolf359 » Thu Nov 15, 2018 12:11 pm

1. Cut back on your spending. Save more. This is easy when everybody else is panicking and also saving. It's like dieting when you have a stomach virus. The Joneses are overextended and aren't spending during a recession, so there's no pressure to spend.
2. Make sure your emergency fund is fully funded. Make sure you have a plan in place for job loss. Make sure you have a plan for an extended (multi-year) job loss.
3. If #1 and #2 are covered, then stop adding new money to bonds and only add to stocks for the duration of the downturn.
4. I increase contributions to investment accounts. If I am at maximum savings, the increased portfolio purchases offset the daily fluctuations in the market.
5. I stop paying attention to total portfolio value, and start focusing on cost per share. My goal during a bear market is to maximum the number of shares I can buy for each dollar. This is done by finding extra money to throw into the market as it drops. That's the only way I "time" the market. All paycheck purchases should be automated.
6. I change stock charts to the maximum time frame. My investment time frame is greater than 10 years. Therefore, I try to only view stock charts with that 10+ year perspective.
7. Don't sell stocks until the market recovers (except for TLH).
8. Make sure all stock purchases are automatic. If you tune out of the markets, make sure investments will continue without you.
9. Cut the news feeds. Don't watch CNBC.
10. My rebalancing rule is that I'm limited to one rebalance per year, unless the market has dropped > 40%. This is because I rebalanced too many times during the last downturn. If I pull the trigger too early, I'm stuck for a year. This encourages me to not market time. If I end up doing nothing, that's fine.
11. Look for a tax loss harvesting opportunity.

If my mind is looking for TLH opportunities and focusing on maximum cost per share, bear markets are good for people in accumulation mode.

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JamalJones
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Re: Strategy during the last stock market decline

Post by JamalJones » Thu Nov 15, 2018 7:43 pm

My strategy during the last downturn was to automatically invest in the same funds/ETFs in my TSP and Roth IRA as I had during the previous downturn and upturn. HOWEVER....During this bull market my strategy was to automatically invest in the same funds/ETFs in my TSP and Roth IRA as I had during the previous downturn and upturn.
TSP + Vanguard Roth IRA + Vanguard Taxable: 80% equities / 20% bonds | Yap, yap, yap, yap, - the bottom line is ya gotta buckle up the chin strap!

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CyclingDuo
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Re: Strategy during the last stock market decline

Post by CyclingDuo » Fri Nov 16, 2018 10:20 am

JamalJones wrote:
Thu Nov 15, 2018 7:43 pm
My strategy during the last downturn was to automatically invest in the same funds/ETFs in my TSP and Roth IRA as I had during the previous downturn and upturn. HOWEVER....During this bull market my strategy was to automatically invest in the same funds/ETFs in my TSP and Roth IRA as I had during the previous downturn and upturn.
Excellent strategy.

:sharebeer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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